Artisan Partners(US:APAM)2025-05-02 20:16Part I Unaudited Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for Artisan Partners Asset Management Inc. for Q1 2025 and 2024, covering financial condition, operations, and cash flows Unaudited Condensed Consolidated Statements of Financial Condition Total assets decreased to $1.37 billion as of March 31, 2025, from $1.62 billion at December 31, 2024, primarily due to a decrease in consolidated investment products Condensed Consolidated Balance Sheet | Account | March 31, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :--- | :--- | :--- | | Total Assets | $1,370,310 | $1,618,756 | | Cash and cash equivalents | $212,890 | $201,172 | | Investment securities | $247,484 | $208,792 | | Assets of consolidated investment products | $219,582 | $538,172 | | Total Liabilities | $868,069 | $868,837 | | Borrowings | $199,471 | $199,430 | | Amounts payable under tax receivable agreements | $341,988 | $341,461 | | Total Stockholders' Equity | $394,645 | $422,002 | Unaudited Consolidated Statements of Operations For Q1 2025, total revenues increased to $277.1 million, operating income rose to $86.5 million, and net income attributable to the company was $61.1 million Consolidated Statement of Operations Highlights | Metric | Q1 2025 ($ thousands) | Q1 2024 ($ thousands) | | :--- | :--- | :--- | | Total Revenues | $277,147 | $264,351 | | Management fees | $277,147 | $264,322 | | Total Operating Expenses | $190,612 | $186,708 | | Compensation and benefits | $155,161 | $149,880 | | Operating Income | $86,535 | $77,643 | | Net Income Attributable to APAM | $61,139 | $59,481 | | Diluted Earnings Per Share | $0.82 | $0.84 | | Dividends Declared per Class A Share | $1.34 | $1.02 | Unaudited Consolidated Statements of Cash Flows Net cash provided by operating activities increased to $157.9 million in Q1 2025, while cash used in investing and financing activities also rose, primarily due to higher dividend payments Cash Flow Summary | Cash Flow Activity | Q1 2025 ($ thousands) | Q1 2024 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $157,874 | $147,019 | | Net cash used in investing activities | ($38,276) | ($29,112) | | Net cash used in financing activities | ($91,856) | ($63,791) | | Net increase in cash and cash equivalents | $27,742 | $54,116 | Notes to Unaudited Consolidated Financial Statements The notes detail significant accounting policies, including VIE consolidation, borrowings, revenue disaggregation, compensation structures, and income tax liabilities, notably a $342.0 million TRA liability - The company consolidates Variable Interest Entities (VIEs) where it has a controlling financial interest, which includes five sub-funds of Artisan Global Funds and three Artisan Private Funds as of March 31, 20253342 Revenue by Vehicle | Vehicle | Q1 2025 ($ thousands) | Q1 2024 ($ thousands) | | :--- | :--- | :--- | | Artisan Funds | $160,973 | $153,002 | | Artisan Global Funds | $13,773 | $12,460 | | Separate accounts and other | $102,401 | $98,860 | | Total Management Fees | $277,147 | $264,322 | - In Q1 2025, the company granted $46.8 million of franchise capital awards to investment team members, which are cash-based long-term incentives tied to the investment returns of the strategies they manage73 - As of March 31, 2025, the liability for amounts payable under the Tax Receivable Agreements (TRAs) was $342.0 million, with expected payments of approximately $38.9 million in fiscal 202585171 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the firm's Q1 2025 performance, noting a 1% AUM increase to $162.4 billion driven by market appreciation despite net client outflows, alongside revenue growth and expanded operating margin - Launched the Global Special Situations strategy, managed by the International Value Group, and made the Growth team's Franchise strategy available to clients114 Key Performance Indicators | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Ending AUM ($ billions) | 162.4 | 160.4 | | Average AUM ($ billions) | 166.7 | 154.2 | | Net Client Cash Flows ($ billions) | (2.8) | (0.5) | | Total Revenues ($ millions) | 277.1 | 264.4 | | GAAP Operating Margin (%) | 31.2 | 29.4 | | Adjusted Operating Margin (%) | 32.1 | 30.9 | AUM and Investment Performance AUM increased by $1.2 billion to $162.4 billion in Q1 2025, driven by market appreciation offsetting net client outflows, with varied performance across investment groups AUM Changes | AUM Component | Q1 2025 ($ thousands) | Q1 2024 ($ thousands) | | :--- | :--- | :--- | | Beginning AUM | $161,208 | $150,167 | | Gross client cash inflows | $7,014 | $6,186 | | Gross client cash outflows | ($9,854) | ($6,709) | | Net client cash flows | ($2,840) | ($523) | | Investment returns and other | $4,138 | $10,825 | | Ending AUM | $162,390 | $160,384 | - For Q1 2025, 15 of 27 investment strategies had net outflows totaling $4.8 billion, partially offset by $2.0 billion of net inflows from the remaining strategies122 - As of March 31, 2025, AUM was sourced 60% from the Intermediated Wealth channel and 40% from the Institutional channel132 Results of Operations Q1 2025 revenues increased 5% to $277.1 million due to higher average AUM, despite a lower weighted average management fee, while operating expenses rose 2% primarily from increased compensation - The increase in revenues of $12.7 million was primarily driven by an 8% increase in average AUM, despite a decrease in the weighted average management fee to 67.5 basis points142 - Compensation and benefits, the largest expense, increased by $5.3 million (4%) due to higher incentive compensation tied to revenues and increased headcount145 - Non-operating income decreased by $20.2 million, primarily due to lower net investment gains on consolidated and nonconsolidated investment products compared to the prior-year period, reflecting market conditions148 Supplemental Non-GAAP Financial Information The company presents non-GAAP measures, with Q1 2025 adjusted net income at $67.0 million and adjusted operating margin at 32.1%, reflecting underlying operational profitability Reconciliation of GAAP to Non-GAAP Measures | Metric | Q1 2025 (Non-GAAP) ($ millions) | Q1 2024 (Non-GAAP) ($ millions) | Q1 2025 (GAAP) ($ millions) | Q1 2024 (GAAP) ($ millions) | | :--- | :--- | :--- | :--- | :--- | | Adjusted Net Income | $67.0 | $61.6 | - | - | | Net Income Attributable to APAM | - | - | $61.1 | $59.5 | | Adjusted Net Income per Share | $0.83 | $0.76 | - | - | | Diluted EPS | - | - | $0.82 | $0.84 | | Adjusted Operating Margin | 32.1% | 30.9% | - | - | | Operating Margin | - | - | 31.2% | 29.4% | Liquidity and Capital Resources The company maintains strong liquidity with $212.9 million in cash and a $100 million undrawn credit facility, supporting its dividend policy and expected TRA payments - The company maintains a strong liquidity position with $212.9 million in cash and cash equivalents and a $100 million undrawn revolving credit facility as of March 31, 2025159163 - A variable quarterly dividend of $0.68 per share was declared for Q1 2025, consistent with the policy to pay out approximately 80% of cash generated each quarter167168 - The liability under the Tax Receivable Agreements (TRAs) was $342.0 million at quarter-end, with a payment of $29.2 million made in April 2025169177 Quantitative and Qualitative Disclosures About Market Risk No material changes in quantitative and qualitative market risk disclosures have occurred since the last annual report - There have been no material changes in market risk disclosures since the last Form 10-K filing180 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025182 - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2025183 Part II Legal Proceedings The company is not currently involved in any material legal or administrative proceedings - There are currently no material legal proceedings against the company184 Risk Factors This section refers investors to the 'Risk Factors' discussion in the company's latest Annual Report on Form 10-K - For a discussion of risk factors, the report refers to the company's latest annual report on Form 10-K185 Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2025, 301,505 shares of Class B common stock were canceled and Class C common stock issued due to an employee-partner termination, constituting an unregistered equity sale - As a result of an employee-partner's termination, 301,505 shares of Class B common stock were canceled and 301,505 shares of Class C common stock were issued during Q1 2025186 Defaults Upon Senior Securities The company reports no defaults upon senior securities - None187 Mine Safety Disclosures This item is not applicable to the company - Not applicable188 Other Information The company reports no other material information, including no Rule 10b5-1 trading arrangement adoptions or terminations by directors or officers - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter ended March 31, 2025188 Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Interactive Data Files (XBRL) - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and XBRL data (101, 104)189